Question 1

If the government wants to limit sales of a particular good,it may do so by imposing a quota.However,the same reduction in sales may be achieved by an appropriately chosen excise tax.

Accepted Answer

A) True 
 B)False  True

Question 2

A lump-sum tax,such as the fee for a driver's licence,does not take into consideration:

Accepted Answer

A)  efficiency. 
B)  the benefits principle. 
C)  the ability-to-pay principle. 
D)  the tax base. 
A)  efficiency. 
B)  the benefits principle. 
C)  the ability-to-pay principle. 
D)  the tax base. C

Question 3

Use the following to answer questions :
Figure: The Market for Music Downloads  
-(Figure: The Market for Music Downloads)Use Figure: The Market for Music Downloads.If the government imposes a tax of $3 in this market,the deadweight loss will equal:

Accepted Answer

A)  $0. 
B)  $22.50. 
C)  $26.25. 
D)  $52.50. 
A)  $0. 
B)  $22.50. 
C)  $26.25. 
D)  $52.50. B

Question 4

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes does not change:

Accepted Answer

A)  the government will receive less tax revenue than anticipated. 
B)  consumers are paying all of the tax. 
C)  producers are paying all of the tax. 
D)  consumers and producers are paying equal amounts of the tax. 
A)  the government will receive less tax revenue than anticipated. 
B)  consumers are paying all of the tax. 
C)  producers are paying all of the tax. 
D)  consumers and producers are paying equal amounts of the tax.

Question 5

If the government levies an excise tax in a market whose supply curve is perfectly inelastic,the burden of the tax will fall completely on the _____,and the deadweight loss will equal _____.

Accepted Answer

A)  consumers;zero 
B)  producers;zero 
C)  consumers;the tax revenue 
D)  producers;the tax revenue 
A)  consumers;zero 
B)  producers;zero 
C)  consumers;the tax revenue 
D)  producers;the tax revenue

Question 6

Use the following to answer questions :
Figure: The Gasoline Market  
-(Figure: The Gasoline Market)Use Figure: The Gasoline Market.The pre-tax equilibrium price is $3,and the equilibrium quantity before tax is 20 000 litres.An excise tax has been levied on each litre of gasoline supplied by producers,shifting the supply curve upward.The total tax revenue collected by the government is equal to:

Accepted Answer

A)  $1.50. 
B)  $15 000. 
C)  $26 250. 
D)  $30 000. 
A)  $1.50. 
B)  $15 000. 
C)  $26 250. 
D)  $30 000.

Question 7

Use the following to answer questions : $\text {Scenario: The Market for Good X:}$
$\text {The market for good $\mathrm { X }$ can be depicted with the following demand and supply equations:}$
$\text {Demand: $P = 50 - Q / 2$}$
$\text {Supply: $P = Q / 3$}$
$\text {where $P$ is price per unit and $Q$ represents quantity in units. Policy makers plan on imposing a $\$ 1$ per unit tax on this good.}$
-(Scenario: The Market for Good X)Use Scenario: The Market for Good X.If a $1 per unit tax is imposed,the deadweight loss associated with the tax will be equal to (round all calculations to two decimal places):

Accepted Answer

A)  $1.00. 
B)  $20.00. 
C)  $0.50. 
D)  $0.60. 
A)  $1.00. 
B)  $20.00. 
C)  $0.50. 
D)  $0.60.

Question 8

If demand is perfectly inelastic,the deadweight loss caused by a tax will be zero.

Accepted Answer

A) True 
 B)False

Question 9

Eli has annual earnings of $100 000,and Molly has annual earnings of $50 000.Each consumer goes to the mall and purchases a microwave oven for $100,and each pays an additional 7%,or $7,in sales tax.This tax is:

Accepted Answer

A)  regressive. 
B)  a wealth tax. 
C)  progressive. 
D)  a property tax. 
A)  regressive. 
B)  a wealth tax. 
C)  progressive. 
D)  a property tax.

Question 10

Determining who actually pays the cost imposed by a tax is the study of:

Accepted Answer

A)  public interest theory. 
B)  rational choice theory. 
C)  tax incidence. 
D)  budget analysis. 
A)  public interest theory. 
B)  rational choice theory. 
C)  tax incidence. 
D)  budget analysis.

Question 11

Suppose that Justin Trudeau initiates a revision of the federal income tax structure such that the tax rate is 10% on all income up to $50 000.Any income above $50 000 is not taxed.This payroll tax will be:

Accepted Answer

A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  structural. 
A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  structural.

Question 12

Use the following to answer questions :
Figure: The Market for Productivity Apps  
-(Figure: The Market for Productivity Apps)Use Figure: The Market for Productivity Apps.If the government imposes a tax of $1 in this market,consumers will pay _____ more per app and purchase _____ fewer apps.

Accepted Answer

A)  $1;5 
B)  $1;25 
C)  $0.50;5 
D)  $0.50;20 
A)  $1;5 
B)  $1;25 
C)  $0.50;5 
D)  $0.50;20

Question 13

Use the following to answer questions :
Figure: Tax Incidence  
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Producers are likely to bear more of the burden of an excise tax in the situations illustrated by panels:

Accepted Answer

A)  a and b. 
B)  a and c. 
C)  b and d. 
D)  b and c. 
A)  a and b. 
B)  a and c. 
C)  b and d. 
D)  b and c.

Question 14

The burden of a tax on a good is said to fall completely on the producers if the:

Accepted Answer

A)  price paid by consumers for the good declines by the amount of the tax. 
B)  price paid by consumers for the good increases by the amount of the tax. 
C)  price paid by consumers does not change. 
D)  wages received by workers who produce the good increase by the amount of the tax. 
A)  price paid by consumers for the good declines by the amount of the tax. 
B)  price paid by consumers for the good increases by the amount of the tax. 
C)  price paid by consumers does not change. 
D)  wages received by workers who produce the good increase by the amount of the tax.

Question 15

Tax structure refers to what a tax is levied on (e.g. ,income,property,profits),and tax base refers to the base (or lowest)rate of taxation on a particular tax structure.

Accepted Answer

A) True 
 B)False

Question 16

If the elasticity of demand is _____ and the elasticity of supply is _____,tax revenue is likely to decrease if the tax rate is increased.

Accepted Answer

A)  3.3;2.1 
B)  3.3;0.5 
C)  0.2;2.1 
D)  0.2;0.5 
A)  3.3;2.1 
B)  3.3;0.5 
C)  0.2;2.1 
D)  0.2;0.5

Question 17

Annual _____ taxes are paid on the value of a home.

Accepted Answer

A)  income 
B)  profits 
C)  sales 
D)  property 
A)  income 
B)  profits 
C)  sales 
D)  property

Question 18

Determining who bears the burden of the tax is a question about:

Accepted Answer

A)  tax incidence. 
B)  externality analysis. 
C)  public interest theory. 
D)  public choice theory. 
A)  tax incidence. 
B)  externality analysis. 
C)  public interest theory. 
D)  public choice theory.

Question 19

Use the following to answer questions :
Figure: The Market for Music Downloads  
-(Figure: The Market for Music Downloads)Use Figure: The Market for Music Downloads.If the government imposes a tax of $3 in this market,the government will receive tax revenue of:

Accepted Answer

A)  $20. 
B)  $30. 
C)  $60. 
D)  $75. 
A)  $20. 
B)  $30. 
C)  $60. 
D)  $75.

Question 20

An analysis of the effect of excise taxes on markets allows us to conclude that:

Accepted Answer

A)  when the price elasticity of supply is equal to zero,an excise tax falls entirely on the consumers. 
B)  when the price elasticity of demand is lower than the price elasticity of supply,an excise tax falls mainly on the producers. 
C)  whether the tax is levied on consumers or producers,the quantity sold will be the same. 
D)  when the price elasticity of demand is higher than the price elasticity of supply,an excise tax falls mainly on the consumers. 
A)  when the price elasticity of supply is equal to zero,an excise tax falls entirely on the consumers. 
B)  when the price elasticity of demand is lower than the price elasticity of supply,an excise tax falls mainly on the producers. 
C)  whether the tax is levied on consumers or producers,the quantity sold will be the same. 
D)  when the price elasticity of demand is higher than the price elasticity of supply,an excise tax falls mainly on the consumers.

Exam 7: Taxes

If the government wants to limit sales of a particular good,it may do so by imposing a quota.However,the same reduction in sales may be achieved by an appropriately chosen excise tax.

A lump-sum tax,such as the fee for a driver's licence,does not take into consideration:

Use the following to answer questions : Figure: The Market for Music Downloads -(Figure: The Market for Music Downloads)Use Figure: The Market for Music Downloads.If the government imposes a tax of $3 in this market,the deadweight loss will equal:

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes does not change:

If the government levies an excise tax in a market whose supply curve is perfectly inelastic,the burden of the tax will fall completely on the _____,and the deadweight loss will equal _____.

If demand is perfectly inelastic,the deadweight loss caused by a tax will be zero.

Eli has annual earnings of $100 000,and Molly has annual earnings of $50 000.Each consumer goes to the mall and purchases a microwave oven for $100,and each pays an additional 7%,or $7,in sales tax.This tax is:

Determining who actually pays the cost imposed by a tax is the study of:

Suppose that Justin Trudeau initiates a revision of the federal income tax structure such that the tax rate is 10% on all income up to $50 000.Any income above $50 000 is not taxed.This payroll tax will be:

Use the following to answer questions : Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps)Use Figure: The Market for Productivity Apps.If the government imposes a tax of $1 in this market,consumers will pay _____ more per app and purchase _____ fewer apps.

Use the following to answer questions : Figure: Tax Incidence -(Figure: Tax Incidence)Use Figure: Tax Incidence.Producers are likely to bear more of the burden of an excise tax in the situations illustrated by panels:

The burden of a tax on a good is said to fall completely on the producers if the:

Tax structure refers to what a tax is levied on (e.g. ,income,property,profits),and tax base refers to the base (or lowest)rate of taxation on a particular tax structure.

If the elasticity of demand is _____ and the elasticity of supply is _____,tax revenue is likely to decrease if the tax rate is increased.

Annual _____ taxes are paid on the value of a home.

Determining who bears the burden of the tax is a question about:

Use the following to answer questions : Figure: The Market for Music Downloads -(Figure: The Market for Music Downloads)Use Figure: The Market for Music Downloads.If the government imposes a tax of $3 in this market,the government will receive tax revenue of:

An analysis of the effect of excise taxes on markets allows us to conclude that:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

If the government levies an excise tax in a market whose supply curve is perfectly inelastic,the burden of the tax will fall completely on the _,and the deadweight loss will equal _.

Use the following to answer questions : Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps)Use Figure: The Market for Productivity Apps.If the government imposes a tax of $1 in this market,consumers will pay _ more per app and purchase _ fewer apps.

If the elasticity of demand is _ and the elasticity of supply is _,tax revenue is likely to decrease if the tax rate is increased.